All posts by Clifford E. Kirsch, Editor

Eversheds Sutherland With more than 25 years of experience, Cliff regularly counsels clients on the design and distribution of investment products including wrap-fee programs and other advisory products, mutual funds, bank collective investment funds and insurance products. He also focuses on issues related to the design and implementation of compliance programs at financial services firms.

Expansion of the pool of accredited investors

On August 26, 2020, the SEC adopted certain amendments that expand the pool of eligible investors in exempt private offerings, which may provide additional sources of capital to business development companies, closed-end funds and other private funds.  The Amendments:

  • expand the definition of “accredited investor” under Regulation D of the Securities Act of 1933, as amended (the Securities Act), to add new categories of natural persons and entities that can qualify, irrespective of their wealth.
  • also expand the entities eligible as “qualified institutional buyers” under Rule 144A offerings to be consistent with the amendment to the “accredited investor” definition.
  • adopt revisions to certain related rules, such as testing the waters under Rule 163B of the Securities Act.

Read more here.

Moving forward under the SEC’s new variable product summary prospectus framework

After more than a decade, the SEC finally adopted a new disclosure framework for registered variable annuity contracts and variable life insurance policies. This sweeping overhaul of the current variable contract prospectus disclosure framework will put variable contract disclosures on a level playing field with mutual funds.

Read more here.

 

Why Compliance Officers Have Even More to Worry About

The issues presented by the case are troubling because if the court sustains the disciplinary action, it could lead to 1) dozens of CCOs being charged every year for their firms’ deficient procedures, even if they acted in good faith; and 2) a strict liability standard applying to “should have known” liability.

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Why FINRA’s 529 Plan Self­-Reporting Initiative Matters a Year Later For Participating and Non-Participating Firms

Over a year ago, on January 28, 2019, FINRA announced its 529 Plan Share Class Initiative (the  Initiative) to encourage firms to self-report potential violations of rules governing 529 plan share class recommendations. FINRA’s concern centered around the potential that supervisory programs were not reasonably designed to determine whether representatives were making suitable share class recommendations given the varying time horizons of beneficiaries.   Approximately 100 broker-dealers elected to participate. Other firms decided not to participate. The deadline for participation in the Initiative has long since passed, however, the issues and regulatory concerns underlying the Initiative remain relevant for both participating and non-participating firms.

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Department of Labor’s Fiduciary Proposal 3.0

In an important development, the Labor Department has issued a new proposal to address conflicted investment advice provided by ERISA fiduciaries:
  • Consonant with the vacatur of its 2016 rule, DOL reinstated the longstanding 5-part test of investment advice fiduciary status, but announced new interpretations of that test that will cause rollover advice and possibly other interactions to become fiduciary advice.
  • DOL also proposed a new, principles-based class exemption broadly available for conflicted advice and intended to align with other bodies of law to which financial institutions are subject.

Read more here